Inflation in the US rose to a two-and-a-half year high, as economists warned
against "tremendous complacency" over the country's climbing
prices.

Official data showed prices rose 3.6pc in the year to May, the biggest leap seen since October 2008, as an easing in fuel prices last month was offset by rising food bills.

Economists were more concerned that the "core" measure of inflation, stripping out the volatile elements of energy and food, jumped 0.3pc on the previous month.

This was the biggest monthly gain in five years when comparing the unrounded data, according to Capital Economics.

The steady rise seen in core prices in recent months suggests the US could be in for a nasty surprise after two decades of growth without an inflation problem, said economists at Legal & General Investment Management (LGIM), the insurance giant's fund division.

"We believe the US growth and inflation mix is in the process of deteriorating significantly," said Tim Drayson at LGIM. He thinks the Federal Reserve, the US central bank, is making a mistake by keeping monetary policy loose, amid widespread complacency about the pace at which prices are rising.

He sees "stubbornly high" inflation ahead – predicting core inflation will near 2.5pc next year – while growth disappoints. A New York manufacturing gauge yesterday showed a surprise slump, reinforcing concerns that the economy has hit a soft patch.

This mix of high inflation and poor growth poses a headache for policy-makers as tackling one issue is likely to worsen the other, the classic stagflationary dilemma.

LGIM's argument is that people may be underestimating the potential pass-through of high commodity costs into prices in the US, particularly if the dollar stays weak. Cheap imports from China have in the past had a disinflationary effect, but this is reversing as rapid Chinese growth pushes up its own domestic prices.

There is also a risk that there is not as much slack in the US labour market as the Fed believes, since some of those unemployed will not have transferable skills. If so, wages could rise sooner than expected, according to LGIM.

Rob Carnell at ING Bank shared the concerns. At 1.5pc, the annual rate of core inflation is "utterly inconsistent with the Fed's current policy of exceptionally accommodative monetary policy," he said.

The inflation figures came as officials at the Fed debated whether to set an explicit inflation target, amid growing calls that setting a commitment would boost credibility. Unlike the Bank of England, the Fed does not have a set goal for inflation, although its forecasts act as implied guidelines.